04 Aug Everyday Financial Literacy
Guest post: Rida Hassan
Have you ever wanted to invest in the stock market but ended up deciding against it because you thought you didn’t have “enough” money? What if I told you that you don’t have to start out with lots of money to grow the value of your savings through the stock market?
There is a new way to invest in stocks today, and you can do it straight through your smartphone by using investment apps. The most popular app for investing newbies is Acorns.
Acorns allows you to automatically invest your spare change through their “roundups” service. To active “roundups,” you must link a valid debit card/credit card to your Acorns account. Once the card is linked, Acorns automatically rounds up all your purchases to the nearest dollar and saves the leftovers! For example, if you made a purchase for $15.25, Acorns would round it up to $16 and deposit 75 cents into your Acorns account.
It may not seem like much, but the change certainly begins to add up, and as soon as it hits the five-dollar mark, it is invested into a diverse portfolio of Exchange Traded Funds (ETFs). These ETFs consist of stocks, bonds, and other securities with varying levels of risk attached to them.
You can also choose to activate recurring weekly or monthly investments for amounts equaling or more than five dollars. There is an option for one-time investments as well for when you have some more money to spare than usual!
Acorns makes you fill out an “Investor Profile” when you sign up, which includes questions about your current employment status, annual income, net worth, and investment goals. This information helps it recommend a suitable portfolio for you out of its five options: Conservative, moderately conservative, moderate, moderately aggressive, and aggressive.
Here is a percentage breakdown for each of their portfolio categories:
– Conservative: 40% Government Bonds, 40% Corporate Bonds, 12% Large Company Stocks, 4% international company stocks, 2% small company stocks, and 2% real estate stocks.
– Moderately conservative: 30% government bonds, 30% corporate bonds, 24% large company stocks, 8% international company stocks, 4% small company stocks, and 4% real estate stocks.
– Moderate: 29% large company stocks, 20% government bonds, 20% corporate bonds, 10% small company stocks, 6%real estate stocks, and 3% emerging market stocks.
– Moderately aggressive: 38% large company stocks, 14% small company stocks, 10% government bonds, 10% corporate bonds, 8% real estate stocks, and 4% emerging market stocks.
– Aggressive: 40% large company stocks, 20% small company stocks, 20% international large-company stocks, 10% emerging market stocks, and 10% real estate stocks.
You are under no compulsion to choose the portfolio setting that Acorns recommends to you. If you think one of these five particularly speaks to your personality and your ambitions, then go for it! You can also switch between portfolios if you feel like something isn’t working out for you how you want it to.
Acorns is an incredibly valuable resource for all those tech-savvy people who want to make the most out of their money. However, do not confuse Acorns for a savings account. There is always a chance of losing out on some money, so as a rule of thumb never invest more than what you can afford to lose. Happy investing!
Shoutout to Rida Hassan for this guest post